Exam 9: Reporting and Interpreting Liabilities

The records of Pam Company showed the following about a machine on January 1,20H: Purchased 1/1/20E for $35,000 Accumulated depreciation at January 1,20H,$26,400 On July 1,20H,the machine was sold for $7,000.Depreciation for the first six months of 20H was $1,467.The gain or loss on disposal would be which of the following?

If a second-hand machine is purchased for operational use in a business,all renovation and repair costs on the used machine incurred by the purchaser prior to its operational use should be excluded from the cost of the asset.

On January 1,20A,Straight,Inc.,purchased a machine with a cash price of $9,500.Straight also paid $500 for transportation and installation.The expected useful life of the machine is 5 years and the residual value is $500.Assuming straight-line depreciation,the annual depreciation expense would be which of the following?

What is the book value of a tangible operating asset?

A corporation may choose to list its operational assets in the current assets section of the statement of financial position.

Sure Company purchased a machine on January 1,20A,at a cash cost of $12,000.The estimated useful life is 10 years,and the estimated residual value is $3,000.The company will use the declining-balance method based on a 150 percent acceleration rate.What will be the depreciation expense for the second year?

On January 1,20A,Johns Company purchased an asset that cost $10,000 (no estimated residual value,estimated useful life 8 years,straight-line depreciation is used).An error was made because the total cost amount was debited to an expense account for 20A and no depreciation on it was recorded.Pretax profit for 20A was $11,250.What was the correct pretax profit for 20A?

In 20B,Gamma Company made an ordinary repair to a delivery truck at a cost of $300.Gamma's accountant debited the asset account,Delivery Vehicles.Was this treatment an error,and if so,what will be the effect on the financial statements of Gamma?

Which of the following statements is false?

A company decided to use the units of production method to calculate depreciation on a car to be driven by the sales manager.The amount of annual depreciation will vary with which of the following?

While estimated residual value is not used to calculate annual depreciation expense under the double declining-balance method,it is used in calculating the asset's book value at the end of its estimated useful life.

In accounting for tangible operational assets,the continuity assumption is important because of which of the following?

When may a company include interest cost as part of the cost of the asset?

No clear line distinguishes capital expenditures (assets)from revenue expenditures (expenses); therefore,it requires managers to exercise judgment in making a subjective decision.

Which statement is false?

Because of its large investment in equipment,West Jet closely monitors the unused seats on flights since it may be more profitable to reduce fares to fill more seats thereby using more of the capacity.

Bangor Industries purchased a car for $22,000 on January 1,20A.The car had an estimated useful life of 80,000 kilometres and an estimated residual value of $4,000.In the second year of ownership (20B),the car was driven 25,000 kilometres.Using the units of production method,what was the amount of depreciation expense for 20B?

Which of the following would be classified as an operational (fixed)asset?

In accounting,which of the following is true of goodwill?

Acquisition cost of property,plant,and equipment is the cash-equivalent purchase price plus all reasonable and necessary expenditures made to acquire and prepare the asset for its intended use.